The ECB kept interest rates unchanged as expected, but President Christine Lagarde delivered a hawkish message despite the decision to hold. Policymakers discussed a rate increase, and Lagarde indicated that conditions could have justified additional tightening. The decision to wait reflected unchanged underlying inflation and uncertainty surrounding the outlook, rather than a declaration that the tightening cycle was over.
For EURUSD, the decision and press conference produced volatile trading. An initial decline took the price below the double bottom near 1.11135, established on October 14 and revisited yesterday. However, sellers could not sustain the break. After reaching 1.1106, the pair reversed higher and rebounded toward 1.1155.
That recovery brought the price into a familiar swing area, with the falling 100-hour moving average just above. The failed break lower gives buyers an opportunity, but getting through resistance is the next requirement.
A hawkish hold keeps the next meeting in focus
Lagarde stressed that holding rates at this meeting does not rule out an increase at the next. Underlying inflation remains a key policy barometer, while elevated energy prices and geopolitical developments continue to complicate the outlook.
The distinction matters. A central bank can leave rates unchanged while still delivering a hawkish message if its guidance keeps further tightening in play. Markets respond to changes in the expected path of rates, as well as the decision announced that day.
Underlying inflation helps policymakers assess how persistent price pressures are beneath volatile headline components. Higher energy costs can lift headline inflation directly, but the broader concern is whether those increases feed into other prices, wages and inflation expectations.
The ECB’s message leaves room to gather more evidence while retaining the option to act.
Incoming data will shape the next decision
On growth, the ECB will assess incoming GDP figures alongside wages, unemployment and November PMIs to judge how the economy is absorbing tighter financing conditions. Updated staff projections and two additional inflation reports will also help shape the next decision.
Those releases matter because monetary policy works with a lag. Higher borrowing costs gradually influence household spending, business investment and demand. Policymakers must judge whether that restraint is sufficient to bring inflation down, or whether persistent price pressures require another increase.
For traders, this keeps the focus on how the data change expectations. Persistent inflation alongside resilient activity could strengthen the case for further tightening. Softer inflation and weaker growth could support another period of waiting.
The break below 1.11135 fails to attract follow-through
Technically, the initial move below 1.11135 gave sellers an opportunity to extend the decline (see chart above). That level had attracted buyers twice, making it an identifiable floor and a logical downside barometer.
However, the move to 1.1106 quickly reversed.
A support break needs follow-through to reinforce the bearish signal. When the price moves below a well-defined floor and then quickly recovers above it, the failure can encourage short covering and fresh buying. Traders who sold the break may find themselves holding positions below a reclaimed support level.
That does not automatically establish a lasting bottom. It does show that sellers failed to maintain control below the old floor. Buyers now need to build on that rejection by breaking resistance above.
Buyers face resistance at 1.1152–1.11616
The rebound toward 1.1155 carried EURUSD into the swing area between 1.1152 and 1.11602. Just above that zone sits the falling 100-hour moving average at 1.11616.
Together, those levels create the first important resistance hurdle.
Swing areas identify prices where the market has previously changed direction or found support and resistance. Moving averages provide another reference for judging momentum and defining risk. When those references sit close together, they create a useful decision zone for buyers and sellers.
A move above—and sustained trading above—1.11616 would strengthen the buyers’ position. A brief spike through resistance followed by a reversal would carry less weight.
Above that hurdle, the next upside targets are:
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1.11845: The former floor from October 15 through October 26.
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1.11913: The falling 200-hour moving average.
The old floor matters because broken support can become resistance when approached from below. Clearing it, followed by the 200-hour moving average, would provide further evidence that buyers are gaining control.
A rejection would put the old floor back in play
If the swing area and 100-hour moving average cap the recovery, the rebound would remain vulnerable. Attention would return to 1.11130–1.11135, followed by the session low at 1.1106.
A renewed break below the former double bottom would give sellers another opportunity. Getting below—and staying below—1.1106 would then be needed to extend the downside.
For now, buyers have rejected the lows, while sellers retain resistance overhead. The next test is whether EURUSD can turn its failed break lower into a sustained break higher through 1.1152–1.11616.
Buyers rejected the break lower, but resistance at 1.1152–1.11616 remains the next hurdle.
The technical ladder highlights the levels that will help determine whether the EURUSD rebound can extend or sellers regain control.
Resistance, from highest to lowest:
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1.11913 — Falling 200-hour moving average: A higher hurdle that buyers would need to clear to strengthen the bullish bias.
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1.11845 — Former floor from October 15–26: Previously support, this level becomes potential resistance when approached from below.
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1.11616 — Falling 100-hour moving average: A key barometer for the recovery. Getting above and staying above would give buyers a stronger foothold.
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1.1152–1.11602 — Swing resistance area: The rebound high near 1.1155 reached inside this zone, making it the immediate battleground.
Support, from highest to lowest:
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1.11130–1.11135 — Reclaimed support near the prior double bottom: Holding above this area would help preserve the failed-break recovery. Falling back below would weaken that argument.
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1.1106 — Session low: Sellers would need a sustained break below this level to confirm a fresh downside extension.
Trading lesson: These levels provide places to assess the price action and define risk. Sellers leaning against resistance have a clear reference for when their bearish view starts to weaken. Buyers looking for a breakout need sustained trading above resistance, followed ideally by that area holding as support on a retest.
For now, 1.1152–1.11616 is the immediate decision zone. Clearing it opens the door toward 1.11845 and 1.11913. A rejection keeps the reclaimed floor near 1.11135 in focus.
This article was written by Greg Michalowski at investinglive.com.